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Being able to understand the discount rate of future cash flows sets you apart as someone who truly understands finance.
Ques 2: Which factor is essential for a company to consider when making long-term investment decisions?
(a) rate of return
(b) opportunity cost
(c) time-value of money
(d) cost of capital
Answer: Option(C): time-value of money
Ques 3: The first step in a personal investment plan is creating a $1,000 emergency fund in a bank. Which step is next?
(a) Invest in guaranteed returns.
(b) Save up three to six months of living expenses.
(c) Start to pay off your debts.
(d) Save 15% of your income in an IRA or 401(K).
Answer: Option(C): Start to pay off your debts.
Ques 4: What is the secret to personal financial security?
(a) Take advantage of complex schemes.
(b) Spend less than you make.
(c) Make buying decisions based on what you want.
(d) Create and keep to a budget.
Answer: Option(B): Spend less than you make.
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The "secret," which is simply common sense, is to spend less than you make.
Ques 5: What are the two crucial elements to personal budgeting?
(a) writing down expenditures and reducing expenditures
(b) writing down expenditures and writing out a plan
(c) writing down your available cash and your expenditures
(d) writing out a plan and working the plan you make
Answer: Option(B): writing down expenditures and writing out a plan
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You have to write things down so you do not lose track of them, and you have to write out your plan to make it actionable.
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